World Food Crisis and Politics

FarmPolicy.com July 15, 2008

Keith Bradsher and Andrew Martin reported in today’s New York Times that, “At least 29 countries have sharply curbed food exports in recent months, to ensure that their own people have enough to eat, at affordable prices.

“When it comes to rice, India, Vietnam, China and 11 other countries have limited or banned exports. Fifteen countries, including Pakistan and Bolivia, have capped or halted wheat exports. More than a dozen have limited corn exports. Kazakhstan has restricted exports of sunflower seeds.

“The restrictions are making it harder for impoverished importing countries to afford the food they need. The export limits are forcing some of the most vulnerable people, those who rely on relief agencies, to go hungry.

Bradsher and Martin explained that, “The new restrictions are just an acute symptom of a chronic condition. Since 1980, even as trade in services and in manufactured goods has tripled, adjusting for inflation, trade in food has barely increased. Instead, for decades, food has been a convoluted tangle of restrictive rules, in the form of tariffs, quotas and subsidies.

“Now, with Australia’s farm sector crippled by drought and Argentina suffering a series of strikes and other disruptions, the world is increasingly dependent on a handful of countries like Thailand, Brazil, Canada and the United States that are still exporting large quantities of food.”

From a political perspective, the Times article noted that, “Powerful lobbies in affluent countries across the northern hemisphere, from Japan to Western Europe to the United States, have long protected farmers in ways factory workers in Detroit could only dream of.

“The Japanese protect their rice industry by making it nearly impossible for imported rice to compete. The European Union severely limits beef and poultry imports, and Poland goes further, barring soybean imports as well.

“… Today’s crisis actually makes that more difficult for them. Food protests in places like Haiti and Indonesia that rely heavily on imported food have convinced many nations that it is more important than ever that they grow, and keep, the food their citizens need.”

The Times article indicated that, “The current dispute over food exports highlights choices that nations have confronted for centuries.

“One relates directly to trade: Is it best to specialize in whatever food grows best in a country’s soil, and trade it for all other food needs — or even, perhaps, specialize in services or manufacturing, and trade those for food?

Food Futures Prices Rise
“Corn and soybean prices pushed deeper into record territory before easing Friday as rain again soaked the Midwest and traders locked in profits ahead of a planting report next week.

“The early gains followed a sharp run-up in commodity prices over the previous two days, and came as oil futures touched a new high just shy of $143 a barrel.”

“Corn for December delivery nudged the all-time high up a penny to $7.96 bushel on the Chicago Board of Trade before pulling back to settle at $7.87, down one cent from the previous close.

“Soybeans for November delivery hit a new record of $15.77 a bushel on the CBOT before falling back to settle at $15.595, down 2 cents. Wheat prices also ended lower, with the September contract tumbling 30.75 cents to $9.12 a bushel on the CBOT,” the article said.

Higher feeding costs have also caused some market observers to keep a keen watch on livestock inventories, a variable that also has an impact on food prices.
Ms. Etter explained that, “On June 2, Secretary of Agriculture Edward Schafer said in a speech on food security at the United Nations Food and Agriculture Organization in Rome that biofuels contributed 2% to 3% of the overall increase in global food prices over the past year. The secretary’s report relied on data supplied by Edward P. Lazear, chairman of the White House’s Council of Economic Advisers.

“Ten days later in testimony before the Senate Energy and Natural Resource Committee, USDA chief economist Joseph Glauber said biofuels contributed up to 10% of the overall increase.

“Now, members of Congress want to know why there are two sets of numbers and whether the government used more benign numbers in Rome as a way to downplay the role biofuels have played in pushing up food prices.”

The Journal item continued with this analysis: “It turns out that Mr. Glauber’s number is higher because he looked at the overall impact on food prices of corn-based ethanol and soybean-based biodiesel. The White House analysis looked at the impact of only corn ethanol.

“That makes a difference. In the past year the price of soybeans, one of America’s biggest crops, has soared as more of the beans were used for biodiesel and since fewer acres of beans were planted last year to accommodate more acres of corn for corn-ethanol.

“A USDA spokesman, Jim Brownlee, says Mr. Schafer was not aware of a different number when he spoke in Rome.

“Because Mr. Schafer used the White House data in his speech, he should have used the word ‘ethanol’ instead of ‘biofuels’ because the numbers he used were only pertaining to corn ethanol.

“Mr. Brownlee says he probably used the word ‘biofuels’ accidentally. ‘When I read that I thought, ‘oops’, he meant to say ethanol,’ he recalls. Mr. Schafer used the word ‘biofuels’ nine times in his speech and during a question-and-answer session with reporters.

“The issue of measuring the total impact biofuels have had on global food prices has become a political thicket. Interest groups, armed with an array of studies, have gone to war over the issue.”

In other news regarding biofuels, David Irvin reported yesterday at the Arkansas Democrat-Gazette Online that, “Sen. Blanche Lincoln, D-Ark., said Congress must think through more deeply the unintended consequences of energy policy before making sweeping changes to current policy.

“‘I think it is right for us to set ambitious goals for renewable fuels, but we have to be cautious of the consequences and make sure that what we are doing is being thoughtful of the other industries that suffer those consequences,’ Lincoln said. The U. S. Department of Agriculture says the government’s ethanol policy has not caused a significant amount of food-price inflation. ‘We don’t think conditions today warrant changes,’ Agriculture Secretary Ed Schafer told a group of reporters and editors in Washington earlier this month, Bloomberg News reported. Corn prices rose about 80 percent in the last year, and with recent floods in the Corn Belt, the cost of a bushel of corn is now hovering above $7. That matters to meat producers like Springdale-based Tyson Foods Inc., because it uses corn and soybeans to feed millions of chickens every week. Tyson will absorb $600 million of extra grain expense this year, the company has said. It also matters to consumers, because the price of meat is rising on retail shelves as manufacturers cope with the commodity inflation. Even food banks have been affected, one Springdale minister said. To what degree ethanol production affects the price of corn — and food — is a matter of debate. But the issue will almost certainly fuel a political clash after the new president takes office, as the meat industry works this year in the halls of Congress to get rid of subsidized ethanol in the United States.”

Price issues are also fostering debate about acreage in the Conservation Reserve Program.

The Associated Press reported on Friday that, “Illinois Sen. Dick Durbin, the Senate’s second-ranking Democrat, praised Department of Agriculture officials for their work in the flooding’s aftermath, saying they were doing everything they could to help the state in the face of legal restrictions that limit aid.

“One unanswered question is whether the government can make Conservation Reserve Program acreage, now set aside for preservation, available for earlier haying and livestock grazing to those affected by the floods.

So much for conservation

“The Agriculture Department may modify rules for the program to allow such activities even earlier than usual when there has been flooding.”

And a Dow Jones news article from Friday (posted at DTN, link requires subscription), reported that, “U.S. Department of Agriculture Secretary Ed Schafer said Friday a decision regarding early release of land out of a government conservation program is expected in the ‘next couple of weeks,’ possibly in time for fall planting.

“‘We’ve got to make a decision in the next couple of weeks and we will do so. To get the ground prepped (for winter wheat), we’ve got to start soon,’ Schafer said.”

The article explained that, “Farmers who enrolled acres in the conservation reserve program commit for that land to be out of production for a set number of years, and those who take it out early usually face penalties. With rising food prices and millions of acres of farmland flooded in the Midwest there have been calls to open that land.

“If the decision is made soon, it would allow for planting of winter wheat this fall. Even though corn and soybeans have been affected by spring flooding, opening the land to winter wheat plantings would allow livestock producers to use some of that for feed, Schafer said.”